-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QC9fP+4pmItj9EWT8iMCrfkgRvUN75XITZsLZgfT84GVYprfJuzH2bl/hQvDmap3 nrk2qvCINrZbpIoKUQ9zqQ== 0000720671-96-000012.txt : 19961120 0000720671-96-000012.hdr.sgml : 19961120 ACCESSION NUMBER: 0000720671-96-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961115 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: HALIFAX CORP CENTRAL INDEX KEY: 0000720671 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 540829246 STATE OF INCORPORATION: VA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08964 FILM NUMBER: 96666997 BUSINESS ADDRESS: STREET 1: 5250 CHEROKEE AVE CITY: ALEXANDRIA STATE: VA ZIP: 22312 BUSINESS PHONE: 7037502202 MAIL ADDRESS: STREET 1: 5250 CHEROKEE AVENUE CITY: ALEXANDRIA STATE: VA ZIP: 22312 FORMER COMPANY: FORMER CONFORMED NAME: HALIFAX ENGINEERING INC/VA DATE OF NAME CHANGE: 19911204 10-Q 1 HALIFAX CORPORATION FORM 10-Q SEPTEMBER 30, 1996 FORM 10Q - QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (As last amended in Rel. No 312905 eff. 4/26/93. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) (x) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the period ended September 30, 1996 (x) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file Number 1-8964 Halifax Corporation (Exact name of registrant as specified in its charter) Virginia 54-0829246 (State or other jurisdiction of incorporation of organization (IRS Employer Identification No.) 5250 Cherokee Avenue, Alexandria, VA 22312 (Address of Principal executive offices) Registrant's telephone number, including area code (703) 750-2202 N/A (former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filled by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filings requirements for the past 90 days. (x)Yes ( )No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as the latest practicable date. 1,330,859 as of November 11, 1996. HALIFAX CORPORATION CONTENTS PART I FINANCIAL INFORMATION Item 1. Financial Statements page Condensed Consolidated Balance Sheet - September 30, 1996 (Unaudited) and March 31, 1996 3 Condensed Consolidated Statements of Income - Three and Six Months Ended September 30, 1996 and 1995 (Unaudited) 4 Condensed Consolidated Statements of Stockholders'Equity - Six Months Ended September, 1996 and 1995 (Unaudited) 5 Condensed Consolidated Statements of Cash Flows - Six Months Ended September 30, 1996 and 1995 (Unaudited) 6 Notes to Condensed Consolidated Financial Statements (Unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II OTHER INFORMATION Item 1. Legal Proceedings 10 Item 2 Changes in Securities 10 Item 3. Default Upon Senior Securities 10 Item 4. Submission of Matters for a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8K 10 Item 1. FINANCIAL STATEMENTS HALIFAX CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1996 AND MARCH 31, 1996
SEPTEMBER 30, MARCH 31, 1996 1996* (Unaudited) (Audited) ASSETS CURRENT ASSETS Cash $599,000 $2.743,000 Trade accounts receivable 21,749,000 11,639,000 Inventory 5,838,000 2,792,000 Prepaid expenses and other 593,000 814,000 current assets TOTAL CURRENT ASSETS 28,779,000 17,988,000 PROPERTY AND EQUIPMENT, at cost less accumulated 5,798,000 4,527,000 depreciation and amortization INTANGIBLES AND OTHER ASSETS, net of accumulated 2,941,000 2,313,000 amortization TOTAL ASSETS $37,518,000 $24,828,000 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued $13,042,000 $11,508,000 expenses Current portion of long-term debt 1,025,000 556,000 TOTAL CURRENT LIABILITIES 14,067,000 12,064,000 LONG-TERM DEBT AND OTHER LIABILITIES 13,123,000 3,980,000 TOTAL LIABILITIES 27,190,000 16,044,000 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock 526,000 518,000 Additional paid-in capital 4,353,000 3,401,000 Retained earnings 5,662,000 5,253,000 10,541,000 9,172,000 Less treasury stock - at cost 213,000 388,000 STOCKHOLDERS' EQUITY 10,328,000 8,784,000 TOTAL LIABILITIES AND STOCKHOLDERS' $37,518,000 $24,828,000 EQUITY *Condensed from March 31, 1996 Audited Financial Statements. See Form 10K filed June 28, 1996. See notes to Condensed Consolidated Financial Statements
HALIFAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME For The Three and Six Months Ended September 30, 1996 and 1995 (Unaudited)
Three Months Ended Six Months September 30 Ended September 30 1996 1995 1996 1995 Revenues $20,531,000 $9,076,000 $36,171,000 $18,022,000 Operating costs and expenses: Cost of services 19,636,000 7,831,000 32,287,000 15,548,000 Selling, general and 80,000 803,000 2,421,000 1,615,000 administrative expenses Total operating costs 19,716,000 8,634,000 34,708,000 17,163,000 and expenses Operating income 815,000 442,000 1,463,000 859,000 Litigation expense -0- 260,000 -0- 260,000 Interest expense 279,000 135,000 492,000 243,000 Income before income 536,000 47,000 971,000 356,000 taxes Income taxes 217,000 20,000 383,000 141,000 Net income $319,000 $27,000 $588,000 $215,000 Net income per common $.24 $.02 $.45 $.18 share: Weighted average number of common 1,321,171 1,168,229 1,315,375 1,174,279 shares outstanding See notes to Consensed Consolidated Financial Statements.
HALIFAX CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
Common Stock Additional Treasury Stock Paid-In Retained Shares Par Value Capital Earnings Shares Cost Total Balance April 1, 1,480,015 $518,000 $3,401,000 $5,253,000 311,786 $(388,000) $8,784,000 1996 Net - - - 588,000 - - 588,000 Income Cash - - - (179,000) - - (179,000) Dividends Stock 23,000 8,000 149,000 - - - 157,000 Options CMSA - - 803,000 - (139,630) 175,000 978,000 Acquisito n Balance September 1,503,015 $526,000 $4,353,000 $5,662,000 172,156 $(213,000) $10,328,000 30, 1996 Balance April 1, 1,480,015 $518,000 $3,401,000 $4,795,000 299,686 $(313,000) $8,401,000 1995 Net - - - 215,000 - - 215,000 Income Cash - - - (152,000) - - (152,000) Dividends Purchase of - - - - 12,100 (75,000) (75,000) Treasury Stock Balance September 1,480,000 $518,000 $3,401,000 $4,858,000 311,786 $(388,000) $8,389,000 30, 1995 See notes to Condensed Consolidated Financial Statements.
HALIFAX CORPORATION CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITIED)
Six Months Ended September 30 1996 1995 Cash flows from operating activities: Net income $ 588,000 $ 215,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 510,000 292,000 Decrease (Increase) in accounts (6,375,000) 1,811,000 receivable Decrease (Increase) in inventory (442,000) 310,000 Decrease (Increase) in other 30,000 (45,000) assets (Decrease) Increase in accounts payable (174,000) (1,115,000) and accrued expenses Total adjustment (6,451,000) 1,253,000 Net cash provided (used) by (5,865,000) 1,468,000 operating activities Cash flows from investing activities: Acquisition of CMSA (348,000) -0- Acquisition of property and (345,000) (92,000) equipment net of purchased operations Proceeds from sale of property and -0- 3,000 equipment Net cash used in investing (693,000) (89,000) activities Cash flows from financing activities: Proceeds from borrowing of long- 14,486,000 5,627,000 term debt Retirement of long-term debt (10,160,000) (6,704,000) Insuance of treasury stock - CMSA 108,000 -0- Acquisiton Cash dividends paid (179,000) (152,000) Proceeds from sale of stock upon 158,000 -0- exercise of stock options Purchase of treasury stock -0- (75,000) Net cash (used )provided by 4,414,000 (1,304,000) financing activities Net decrease in cash (2,144,000) 75,000 Cash beginning of period 2,743,000 18,000 Cash end of period $ 599,000 $ 93,000 See notes to condensed consolidated financial statements
Halifax Corporation Notes to Condensed Consolidated Financial Statements (Unaudited) Note A - Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ending March 31, 1997. For further information refer to the consolidated financial statements and footnotes thereto included in the Halifax Corporation Annual Report on Form 10-K for the year ended March 31, 1996. Note B - Acquisition In accordance with a Plan of Merger ("Plan") which was duly adopted by the board of directors of both parties to the merger, CMS Automation, Inc. ("CMS"), a Virginia corporation, merged into CMSA Acquisition Corporation ("CMSA"), a Virginia corporation wholly owned by Halifax Corporation, a Virginia corporation. CMS merged into CMSA on the following basis. Pursuant to the Plan, each issued and outstanding share of CMS common stock was converted into, and became exchangeable for, the number of shares of validly issued, fully paid and nonassessable common stock of Halifax equal to a conversion ratio meaning a fraction, the numerator of which is 139,630 and the denominator of which is equal to the sum of the number of shares of CMS issued and outstanding on the effective date of the merger plus the number of shares that would be represented by the conversion of $450,000 worth of debt to equity. In this regard, CMS shareholders who held promissory notes of CMS in the amount of $450,000 converted said debt to equity in CMS. In addition to the initial issuance of 139,630 shares of Halifax stock to CMS shareholders which was based on the net equity value of CMS, Halifax stock will be awarded annually for three (3) years subsequent of the merger to the CMS shareholders on a pro-rate basis, excluding Halifax stock issued as a result of the conversion of debt to equity, having a value equal to one-third of the net after tax income of CMSA operating as a wholly owned subsidiary of Halifax. The assets acquired included accounts receivable and the inventory and equipment used in conducting and operating the business of CMS which consists of computer systems integration including wide area and local area networking, consulting, application development and training. Closing of the transaction took place on April 1, 1996 with a Certificate of Merger issued by the State Corporation Commission of Virginia effective April 9, 1996. Results of CMSA operations have been included since the date of closing. Note C - Pro Forma Financial Information The following unaudited pro forma combined summary statement of operations information presents the historical results of operation of the Company and CMSA for the six month periods ended September 30, 1996 and 1995, with pro forma adjustments as if the acquisition transaction had been consummated as of the beginning of the periods presented. The pro forma information is based upon certain estimates and assumptions the management of the Company believes are reasonable in the circumstances. The unaudited pro forma information is not necessarily indicative of what the results of operations actually would have been if the transaction had occurred on the date indicated. Moreover, they are not intended to be indicative of future results of operations. Pro Forma Information Six Months Ended September 30, 1996** 1995 Revenue $36,171,000 $28,912,000 Net Income $ 588,000 $ 214,000 Earnings Per common Share $ .45 $ .16 Weighted Average Number of Common Share Outstanding 1,315,375 1,313,918 ** Actual Results for the period Note D - Contingent Matters The Company is a co-defendant or is defendant in various lawsuits. The Company provides for costs related to contingencies when a loss is probable and the amount is reasonably determinable. In the opinion of management, based on advice of counsel, that the ultimate resolution of any contingencies, to the extent not previously provided for, will not have a material adverse effect on the financial condition of the Company. However, depending on the amount and timing of an unfavorable resolution of these contingencies, it is possible that the Company's future results of operation or cash flows could be materially affected in a particular quarter. Note E - New Accounting Pronouncements The Company adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long -Lived Assets to be Disposed of," effective April 1, 1996. SFAS No. 121 requires that certain long-lived assets to be held and used be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Additionally, SFAS No. 121 requires that certain long-lived assets to be disposed of be reported at the lower of carrying amount or fair value less cost to sell. The adoption of SFAS No.121 did not have a material effect on the Company's consolidated earnings and financial condition. Part 1, Item 2. Management's' Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Revenues for the second quarter and six months ended September 30, 1996 were $20.5 million and $36.2 million representing growth of 126% and 100% respectively over comparable revenues for the same periods in the prior year of $9.1 million and $18.0 million. The increases are due approximately equally to internal growth and the CMSA acquisition. Total operating costs and expenses as a percentage of revenues were 96% and 95% for both the second quarter and six months of FY 1997 and FY 1996 respectively. During the second quarter of FY 1997, a change was made to the accounting structure of the CMSA operation, acquired in the first quarter, to align its accounting structure to that of the Company. As a result of conforming the accounting structure, a year-to-date total of approximately $858,000 of expense was reallocated from general & administrative expense to cost of sales and services. General & administrative expense was 7% of revenue for the six months and is expected to approximate 7 to 9% over FY 1997 as experienced in prior years by the Company. During the second quarter of FY 1996, $260,000 of litigation expense associated with a trial of a lawsuit previously described was incurred. Interest expense for the second quarter and six months remained level between fiscal years at 1.4% of revenue. Net income for the second quarter was $319,000 compared with $27,000 for the same quarter of the prior year. For the six months ending September 30, 1996, net income was $588,000 compared with $215,000 for the prior year. The prior year was affected by the aforementioned litigation expense. Net income for the second quarter versus first quarter of FY 1997 increased by 19% on a 31% increase in revenues. Third and fourth quarter revenues are expected to be comparable to those of the second quarter, although profit margins could improve. Liquidity and Sources of Capital The financial condition of the Company remains strong with working capital of $14.7 million and a current ratio of 2.05. Long-term debt has increased over $9 million between March 31, 1996 and September 30, 1996 and has been applied to convert CMSA short-term account receivable financing to long-term financing at reduced interest rates and to the purchase of inventory to support the internal growth of the Company's computer services division. On September 30, 1996, the Company's line of credit was increased from $7.5 million to $8.5 million. $7.5 million was outstanding as of September 30, 1996. The Company expects that cash generated form operations and the Company's line of credit will be sufficient to meet its normal operating and dividend requirements in the foreseeable future. Part II. Other information Item 1. Legal Proceedings Commercial Business System, Inc. v. Halifax Corporation et al. Plaintiff's claim, which has been the subject of judicial proceedings since August of 1990 and was consolidated with a similar claim against BellSouth, went to trial on October 18, 1995, resulting in a jury verdict against Halifax, a former employee and a non-employee, for wrongful interference with a prospective business relationship. The jury award for compensatory damages plus interest has been overturned by the judge in the case and final judgment entered in favor of Halifax. The plaintiff has been granted the right to appeal this decision Item 2. Changes in Securities - Not applicable Item 3. Defaults upon Senior Securities - Not applicable Item 4. Submission of Matters to a Vote of Security Holders At the annual meeting of security holders, held September 20, 1996, the then current members of the Board of Directors were re-elected and the appointment of Ernst & Young to serve as independent accountants for the Company and its subsidiaries for the year ending March 31, 1997, was ratified. Item 5. Other information - Not applicable Item 6. Exhibits and Reports on Form 8-K The following exhibits and reports included herein: (a) Exhibits - Not applicable (b) Reports on Form 8K - None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HALIFAX CORPORATION (Registrant) Date: November 14, 1996 By: s/Howard C. Mills Howard C. Mills President Date: November 14, 1996 By: s/John D. D'Amore John D. D'Amore Vice President, Finance & Accounting For a menu of Halifax Corporation news releases available by fax 24 hours (no charge) or to retrieve a specific release, please call 1-800-758-5804, ext. 391950, or access the address http://www.prnewswire.com on the Internet. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HALIFAX CORPORATION (Registrant) Date: By: Howard C. Mills President Date: By: John D. D'Amore Vice President, Finance & Acccounting For a menu of Halifax Corporation news releases available by fax 24 hours (no charge) or to retrieve a specific release, please call 1-800-758-5804, ext. 391950, or access the address http://www.prnewswire.com on the Internet. EX-27 2 10Q-SEPTEMBER-1996
5 10Q-SEPTEMBER-1996 1 0 MAR-31-1997 APR-1-1996 SEP-30-1996 6-MOS 1 599,000 0 21,749,000 0 5,838,000 28,779,000 5,798,000 0 37,518,000 14,067,000 0 0 0 526,000 10,015,000 37,518,000 36,171,000 36,171,000 32,287,000 34,708,000 0 0 492,000 971,000 383,000 588,000 0 0 0 588,000 .45 .45
-----END PRIVACY-ENHANCED MESSAGE-----